Updated Nov 2020 – 6 Minute Read.
What to consider before you buy off the plan
Buying off the plan has become one of the most popular ways that first home buyers get into the property market. This process involves buying a property that hasn’t been built yet. A property developer will sell off house and land packages that let you purchase a block of land before deciding on what type of house design you would like built on it.
If you’re looking to be a first time home buyer then it is often one of the easiest and most affordable options for purchasing a property. But like any major property purchase, there are lots of things to take into consideration. Buying off the plan can still come with its issues along the way. Think about the suburb your new house will be in. Consider the time it takes to build a new house and the choice of builder you’re going with.
After weighing up the pros and cons of buying off the plan it’s still your decision to make. If you’re looking to learn more about the buying off the plan then you’re already on the right track! Here we’ll cover the do’s and don’ts of buying off the plan.
Take advantage of lower house prices
On average, you’ll find houses that you can buy off the plan are cheaper than most alternatives. Property developers usually offer lower prices and financial incentives to secure the building project before construction starts. Just watch out for any added extras that might not be obvious until further down the track.
Choose your custom house options
The earlier you get involved with the design/construction of your property, the more options you’ll get. Buying off the plan enables you to choose lots of custom design options for your house. You may be able to choose the colours of your house, fittings, and options like solar power, and ducted heating. With pre-built houses, you won’t have the luxury of choosing all these features as they have already been chosen for you.
Enjoy discounts from stamp duty
Buying off the plan may enable you to save a lot of money on stamp duty. Most states in Australia offer large discounts on newly constructed properties. It’s just one of the reasons why property developers continue to thrive in Australia. Because you’re buying land and signing a contract before construction begins, your stamp duty will only apply to the value of the land, not the house itself.
A low maintenance option from the get-go
Another advantage of buying and building a brand new property is the low maintenance required afterwards. Often when first-time home buyers settle into their new house they’ll find little issues here and there which need to be fixed. Issues like these can drive up maintenance costs and make the property fairly expensive to maintain.
A great advantage with a newly-built house is that maintenance costs will be non-existent or very minimal for at least the first five to ten years. You should always do your homework and research just how much some of these maintenance costs are before you go ahead and buy a house for living in or as an investment property.
Don’t pay a full deposit from the start
One of the most appealing aspects of buying off the plan is how a deposit is paid for it. When you first acquire a property from buying off the plan you will only need to pay a small portion of the deposit to the developer. The rest of the deposit for the house doesn’t have to be paid till the construction of your house is completed.
Choose your developer wisely
Don’t just go with the first property developer you find. There are still risks involved with choosing a bad property developer. One of the biggest risks you take is that your property developer goes into administration before your house is constructed. While this doesn’t happen often, it can happen.
So before you choose a property developer, ask for evidence of past projects. Try contacting other people who have previously bought property from them. Ask what their experience was like with the developer. Check for any media reports on past projects and online reviews. Try visiting a few of the houses the developer has built in the past.
Don’t ignore the sunset clause
The contract of sale for buying your property off the plan will have a sunset clause in it. This clause puts a time limit on the contract’s validity. If your property developer fails to complete construction of your house by a certain date, the contract is declared null and void. The end result is the deposit being returned to you and you will no longer own the property.
This clause was originally created to protect buyers from excessive building delays. However, in recent years some property developers have purposely run overtime on building projects to terminate the contracts and resell these properties at a higher price. This is just another reason to thoroughly investigate a property developer before signing a contract of sale and buying off the plan.
Don’t accept defective materials
When you consider constructing a new house the last thing you think is that it may become a death trap. Unfortunately, that’s one reality you may have to face if your new house gets built using defective materials. The most recent example of this is the use of flammable cladding.
By today’s building standards all houses and apartments should be built with cladding material that’s not flammable. These non-flammable materials can help stop the spread of a fire. Unfortunately, there’s been a lot of recent cases where new properties have been built with flammable cladding, making homes far more dangerous in the event of a fire.
Are you getting what you paid for?
When you’re buying off a plan it’s easy to imagine you’re getting the dream house that’s rendered in the pictures and imagery you’ve seen in all the ads or display suite. But don’t be deceived. Rarely, the finished product of a house looks exactly like how you imagined it.
The same colour schemes and features you find in a display house may not find their way into the end product of your own house. In some cases, there can be a provision for variation that’s outlined in the contract of sale. For apartments, these provisions can come in the form of a 5% reduction in the apartment size. It’s little changes like these which begs the question; are you getting what you paid for?
For most cases, buying off the plan can be one of the best options for first home buyers. But like anything that sounds too good to be true, there are always risks involved. So before you sign a contract of sale for a new house, take your time to research the contract and the developer in charge of building your house.
Being prepared and doing your research is one of the best ways to protect yourself from a bad property purchase. Ask around and take as much time as you need until you’re satisfied that buying off the plan is the best option for you.